The popular change that we will all regret

If you think the quality of our politicians is bad now, just wait until this "reform" kicks in, writes Gregory Hywood.

In their frenetic scramble for advantage in this election year, John Howard and Mark Latham have done a grave disservice to the future quality of government in this country.

While electorally appealing, the knee-jerk decision by both men to scrap present pension entitlements for MPs is guaranteed to result over time in a considerably less skilled legislature. If voters today bemoan the poor quality of their representation, it is frightening to imagine what they will think in a decade.

This is because the changes that will be wrought under the Latham-inspired, Howard-executed plan will more than halve the total remuneration of MPs in many instances.

A change of that dimension can only make Parliament a far less attractive proposition for high-quality people who, by dint of their talent, are blessed with alternative career options.

Consider a House of Representatives backbencher earning a base rate of $102,760 who stays in Parliament for four terms, or 12 years. Under a 9 per cent accumulation plan this person may accrue up to $200,000 at the end of that period.

The present scheme, into which the member contributes 11.5 per cent a year, would provide a pension of 60 per cent of salary. Assuming 3 per cent annual growth, the backbench salary would be $146,500 after 12 years. Over a 20-year retirement, the pension would provide an income of $87,900 annually or $1,758,000.

This equates to a $1.5 million-plus difference in the capital base from which retirement income is derived.

For an MP to be fully compensated for this lost pension entitlement, Parliament would have to vote to double politicians' incomes. It will not happen. Imagine the outcry.

It is largely irrelevant whether the scheme is consistent with community standards. It is not and was never intended to be.

Parliamentary superannuation was introduced in 1948 by Ben Chifley, a Labor hero and certainly no rorter of public money. It was always based on a trade-off between income and pension arrangements. The underlying deal has been that to make up for relatively low pay, constant travel to Canberra, and the personal sacrifices involved in public life, MPs could expect to retire with some grace.

To break that arrangement without replacing it with a legitimate alternative destroys the entire incentive structure designed to get a broad base of good-quality people into Parliament, and from which real leadership material can emerge.

Think of it in these terms. You are applying for a job. Then by some bizarre stroke of fate the package on offer is halved. Would you take it?

Or from the other perspective. You are attempting to fill a position but the word comes down that you can offer only half the market rate. Would you expect to be able to interview the same calibre of candidates?

Ignore MPs who are now saying they don't care, it's not the money that matters, it's about serving the public. The politics of the moment demands such a response.

They may indeed genuinely want to serve. They may be addicted to politics and love the life. But while the effect will vary between individuals, money is always a factor. Families and futures have to be made secure.

Until last week the unappealing personal and family conditions could be justified on the basis that sacrifices now could be traded off against some financial security afterwards.

Sure, there will still be candidates. But much talent will never appear in our Parliament. There will be a tendency to the doctrinaire and ideologically obsessed over the calm and thoughtful, the lower-level public servant over the private sector candidate, hacks over leaders.

And we will lose the significant public policy benefits entwined in the system.

Free of the fear of financial difficulties if defeated, there was at least some inbuilt bias of members towards good policy. How much support will there now be for the tough decisions, when losing an election means no financial safety net, no job prospects and plenty of bills to pay?

Moreover, the system provided a disincentive to the chronic corruption that has been the bane of legislatures around the world.

Of course, the present shambles springs from a community unwillingness to accept the legitimate role of politics in society.

We hire politicians to resolve the conflicts we cannot achieve en masse. Yet we attack them for not standing for anything, resent their very existence and expect them to live off scraps.

By and large they have done a good job. The economy is prosperous and our broad immigrant-based community is cohesive.

You get what you pay for, and if the present income/pension trade-off was to be rebased, the alternatives were worthy of careful consideration. Yet between them Latham and Howard have pulled apart the fabric with no thought to the consequences.

Latham wanted to look the popular hero and broke the bipartisanship on which the system is based. Howard, who cannot seem to get a grip on his young opponent, panicked and scrapped an arrangement that he knew was sound and every prime minister for more than 50 years had managed to defend.

He could have declared the present system over and referred it to review. At least there would have been some consideration of options for what is a serious issue of public policy. Instead, Howard legitimised Latham's political leadership, provided him with even more momentum, and left MPs' remuneration in disarray.

It might take years for the consequences to take effect. But they will not be good.